abstract.
With surprising frequency, the government accepts a restricted
charitable gift but later determines that compliance with the donor’s
restrictions is illegal, undesirable, or impossible. The government must then
continue complying with a restriction it deems objectionable, and seek court
approval to modify or deviate, or otherwise risk legal consequences for
violation. When accepting a restricted charitable gift, the government often
discounts future administration and compliance costs that can significantly
undermine public benefits produced by the donor’s philanthropy.
A rich literature
has examined restricted charitable gift policy largely from the donor’s
perspective. That scholarship focuses on various mechanisms for supervising and
enforcing donor-imposed restrictions. This Essay accepts as settled law that
any charitable donee, including the government, should comply with
donor-imposed restrictions unless legally altered. This Essay then covers new
ground by rethinking the donee’s role in philanthropic transfers that most
acutely implicates the public interest in charitable assets: the government’s
acceptance of restricted charitable gifts.
Through a
survey of litigated disputes involving government compliance with a restricted
charitable gift, this Essay reveals four patterns of frequent conflict: when
donor restrictions (1) violate public policy, (2) diverge from governmental
priorities, (3) prescribe a charitable purpose impossible to accomplish with
the amount given, or (4) subject the government to liability for gift
maladministration. Those disputes demonstrate why the government’s policy
regarding restricted charitable gifts should not be acceptance by default. The
Essay concludes by recommending government-acceptance-policy reforms that
better protect the public interest in charitable assets while providing greater
clarity for donors deciding how to structure a restricted charitable gift.
Introduction
The American doctrine of testamentary freedom robustly
protects the right of property owners to decide how to alienate their assets at
death. Property
owners, for example, may exercise testamentary freedom by imposing restrictions
governing the future use of gifted property, provided that the donative
objective is not illegal. Donor-imposed restrictions
can be applied to charitable gifts, including philanthropic donations to the
government, and they can
remain in place long after the donor’s death.
Donees, however, are not compelled to accept restrictions
they find objectionable. When such objections are not addressed before an
inchoate gift proposal ossifies into a binding donative transfer, a donee can
avoid subjecting itself to the donor’s restrictions by disclaiming the property
interest rather than accepting the problematic gift.
This Essay contends that, like any donee, the government has
the power to repudiate a charitable gift when it objects to the attendant
restrictions, but that the
government too often fails to exercise that power. As a result, the government
often accepts restricted charitable gifts that are not aligned with the public
interest in charitable assets. We therefore argue that the government should be
far more selective about accepting a restricted charitable gift because, in the
long run, the cost of complying with or undertaking litigation to modify
donor-imposed restrictions can undermine the value and enjoyment of
philanthropy as a public good.
For a cautionary tale, consider a recent high-profile case in
which a local government found itself ensnared in litigation more than two
centuries after the donor’s charitable gift. In 1822, President John Adams
deeded several real-property parcels in a charitable trust to his hometown of
Quincy, Massachusetts. The parcels were expressly
restricted for the purpose of funding construction of “a Congregational Temple
to be built of stone, to be taken from the premises,” as well as “a School for
the teaching of the Greek and Latin languages, [and] arts and sciences.” When Adams
died in 1826, Quincy made good on its obligation to build the church, but
plans for the private school proved more challenging. In 1870, the granite-clad
Adams Academy finally opened, but it did not last long as an educational
institution and closed for good in 1907. Because
President Adams’ original restriction governing the schoolhouse property
remained binding, the town petitioned courts for several trust modifications,
including designation of a substitute charitable beneficiary (the Woodward
School for Girls) and approval of a fifty-year lease to the Quincy Historical
Society.
The controversy’s modern epoch began in 2007 when the
Woodward School accused Quincy of breaching its fiduciary duty to invest the
trust’s liquid assets prudently. The multi-year litigation culminated
in an unfavorable outcome for Quincy: the trial court removed the city as
trustee for cause and the state supreme court
held that the city had waived any sovereign-immunity defense by accepting
Adams’s appointment as charitable trustee. After its
removal as trustee, Quincy invoked the nuclear option of condemning the
schoolhouse by eminent domain, an escalation that remains in litigation today.
In hindsight, Quincy might now regret its acceptance of
President Adams’s gift because the restrictions generated centuries of legal
woes. While, by modern standards, the city’s obligation to build a church might
be seen as violating the Establishment Clause’s church-state-separation
doctrine, it was
Quincy’s administration of the schoolhouse gift that ultimately subjected the
municipality to fiduciary liability. Likewise, President Adams might have
considered a different estate plan if he could have predicted the academy’s
permanent closure and the city’s condemnation of the property for an unrelated
public purpose. Judges presiding over the case have expressed their own exasperation,
with one noting that “were he to be with us today, President Adams would, most
assuredly, not be pleased with the events of the past fifty-seven years.”
It turns out that the Adams Academy saga is not an isolated
case. As another court recently lamented, disputes arising from the
government’s acceptance of restricted charitable gifts are “disturbing[ly]”
common. Our own
research confirms that such disputes are neither infrequent nor new. The frequency
of disputes involving restricted charitable gifts to the government and their
potential to severely undermine the public interest in charitable assets render
this topic important and timely.
This Essay seeks to evaluate the government’s exercise of
repudiation rights at a pivotal moment of the gifting process–before acceptance
of a restricted charitable gift. Acceptance is the pivotal moment because,
thereafter, the transfer is complete and the gift is generally governed by the
“golden rule” of testamentary freedom: “Whoever has the gold, makes
the rules!” Thus, when a donee accepts a gift, the law generally
requires the donee to comply with restrictions imposed by the donor. Unless the
restriction violates public policy or the government follows proper procedures
to obtain a court’s approval to modify or deviate, the law requires compliance
once the government has accepted a restricted charitable gift.
We recognize that the American doctrine of testamentary
freedom is contestable. A contrary rule, for example, might resolve objections
to donor-imposed restrictions by allowing the government to invalidate them
unilaterally or by treating restrictions as unenforceable under certain
conditions. But a general
policy of ex post invalidation could invite the government to solicit charitable
gifts without any intention or legal obligation to comply with the agreed-upon
terms—dubious conduct that could bring public officials uncomfortably close to
violating prohibitions against fraudulent charitable solicitation. Moreover, the
federal government and many states have enacted legislation that authorizes the
acceptance of charitable gifts and empowers the government to enter into
agreements to implement such gifts. Several
states go a step further in honoring donative intent by expressly requiring
municipalities that accept a charitable gift to comply with the donor’s
restrictions.
We also acknowledge that disclaimer is not the only way for a
donee to avoid subjecting itself to the legal dictates of a gift restriction. A
restricted charitable gift can be construed as creating a charitable trust, thereby
enabling the donee to seek judicial permission to alter the restriction under
one of several trust-modification doctrines. Under the
cy-près doctrine, for instance, a court can modify restrictions imposed by a
charitable trust in a manner consistent with the donor’s general charitable
intent if the donor’s chosen charitable purpose is (or has become) “unlawful,
impracticable, impossible to achieve, or wasteful.” But it is always cheaper and more
efficient to disclaim from the outset rather than to accept and pursue
modification litigation down the road.
This Essay explains why the government’s ex ante disclaimer
of a restricted charitable gift often better serves the public interest in
charitable assets than post-acceptance modification litigation. Our research
reveals that, in the long run, accepting restricted charitable gifts can saddle
the government with burdensome compliance costs and produce outcomes misaligned
with both the public interest (as determined by the government’s then-presiding
officials) and the donor’s intent. When accepting a restricted gift, the
government tends to discount the likelihood that future circumstances might
render the donor’s specified charitable purpose impracticable, illegal, or
politically untenable for a municipality serving as a charitable fiduciary. Such gifts
obligate the government to subsidize compliance with (or litigate relief from)
the donor’s privately selected restrictions when future generations of elected
officials determine that the original restrictions diverge from the community’s
current needs or priorities. Restricted charitable gifts can also expose the
government to significant liability for gift maladministration when the gift
requires the government to undertake functions for which it lacks institutional
expertise, such as managing a trust’s financial investments or operating a
residential dormitory for schoolchildren.
These observations lead us to conclude that donor-imposed
restrictions governing a charitable gift should remain imposable and
enforceable, but that governments should be far more circumspect about
accepting a restricted charitable gift in the first place. On balance, it is
often preferable for both the donor and the public to appoint private
fiduciaries, rather than the government, to administer restricted charitable
gifts. We therefore challenge the prevailing norm among federal, state, and
local governments to accept restricted charitable gifts by default.
This Essay proceeds as follows: Part I surveys
litigated disputes involving governmental acceptance of a restricted charitable
gift. That survey identifies four fact patterns that tend to generate gift
compliance litigation. Part II contains two proposals for reform: (1) the
establishment of formal procedures through which the government can
prospectively evaluate proposed gift restrictions; and (2) the specification of
substantive criteria for gift acceptability to better guide the government when
reviewing gift proposals and donors when considering whether to donate a
restricted charitable gift to the government.
I. charitable
gift compliance litigation
This Part surveys litigation involving restricted charitable
gifts to the government. It identifies four fact patterns that are especially
apt to generate disputes: (1) when donor restrictions violate public policy,
(2) when donor restrictions and governmental priorities diverge, (3) when a
restricted gift lacks sufficient funding to accomplish the donor’s specified
charitable purpose, and (4) when the government’s maladministration of a gift
subjects it to liability.
A. Restrictions in Violation of Public Policy
Some of the most consequential civil-rights decisions by the
U.S. Supreme Court have involved the government’s acceptance of charitable
gifts that were accompanied by donor-imposed restrictions that would later come
to violate public policy. Indeed, those cases helped define the state-action
doctrine that compels the government to comply with the U.S. Constitution when
enforcing certain types of private restrictions.
This Section focuses on charitable gifts containing
restrictions that discriminate expressly on the basis of race, gender, or
religion. Today, such discrimination is generally prohibited by the Fourteenth
Amendment’s Equal Protection Clause when that discrimination is performed or
enforced by the government. In the litigation examples
described below, the gift restrictions did not violate public policy at the
time of the gift but were challenged years later in response to subsequent
changes in constitutional and antidiscrimination law. Disclaimer of the
restricted gifts in the first instance, however, could have avoided both the
litigation costs and societal harms caused by the underlying discrimination.
We begin with Stephen Girard’s 1831 will, which allocated
funds for the erection, maintenance, and operation of a school, but stipulated
that the institution could only admit “as many poor white male orphans, between
the ages of six and ten years, as the said income shall be adequate to
maintain.” Girard
selected the City of Philadelphia as trustee because “he undoubtedly [wanted]
to obtain an immortal trustee.” The school, Girard College,
commenced operations in 1848 under the fiduciary oversight of Philadelphia’s
Board of Directors of City Trusts.
In 1954, two Black students who were denied admission based
solely on their race challenged Girard’s racial restriction as a violation of
equal protection. The Pennsylvania Supreme
Court enforced Girard’s restriction after concluding that the gift was made “by
a private individual disposing of his own property” who “certainly did not
intend . . . to empower [the city] to [administer the
school] in its public or governmental capacity.” But the U.S.
Supreme Court reversed, holding that the state-action doctrine applied because
a state agency operated the school. Today, more
than ninety percent of students at Girard College are African American.
By accepting Stephen Girard’s bequest, and, in particular, by
agreeing to implement his racially discriminatory admissions policy, the City
of Philadelphia invited upon itself an imponderable choice between two bad
options. It could violate the donor’s restriction because Girard’s admission
policy served no legitimate governmental purpose, thereby inviting the state
attorney general or other private parties to sue the city to enforce
compliance. Alternatively, Philadelphia could comply with the gift restriction
by racially discriminating against its own citizenry at the behest of a
deceased donor. The city chose the latter route, which had the effect of
harming Black children who wished to attend the school and forcing Black
taxpayers to subsidize the city’s efforts in state and federal courts to
perpetuate racial discrimination against Black Philadelphians.
Although probably unthinkable at the time, the better option
would have been to disclaim Girard’s gift at the outset, sparing Philadelphia
from implementing the restriction and later litigating its constitutionality.
If the city’s disclaimer had led to an alternate appointment of a private
trustee, a student aggrieved by the discriminatory admissions policy could have
challenged Girard’s restriction on other legal grounds and likely prevailed. Had the city
appointed a private fiduciary, it could have ensured that private parties,
rather than the government, would bear the litigation costs.
The 1911 will of Augustus Bacon contained a similarly
discriminatory charitable gift restriction and produced similar litigation.
Bacon, the U.S. Senator from Georgia, donated a tract of land known as
Baconsfield to Macon, Georgia. Bacon’s will stipulated
that the land “was to be used as ‘a park and pleasure ground’ for white people
only” because “while he had only the kindest feeling for the Negroes he was of
the opinion that ‘in their social relations the two races (white and negro)
should be forever separate.’” The city kept the park
segregated for decades, but in response to 1960s civil-rights litigation, it
began admitting Black people.
Members of the park’s Board of Managers then sued to replace the
park’s existing trustees with new
trustees who would comply with the racial segregation mandated by the gift’s
express terms. Senator
Bacon’s heirs also intervened, seeking a reversion of the property if the court
did not remove the park’s existing trustees. The Georgia
Supreme Court upheld the appointment of the heirs’ hand-picked trustees,
explaining that “Bacon had the absolute right to give and bequeath property to
a limited class.” But, once again, the U.S.
Supreme Court reversed on state-action grounds.
On remand, the state supreme court concluded that the trust’s
sole purpose of maintaining a racially segregated park had become impossible. The court
found that the trust had terminated, so it imposed a resulting trust in favor
of Bacon’s heirs. The U.S. Supreme Court
affirmed the state court’s ruling, which returned the park to the donor’s heirs
rather than modify the trust to avoid a violation of public-accommodations laws
prohibiting racial discrimination.
In terminating the trust and returning the park to Bacon’s
heirs, the state courts “concluded, in effect, that Senator Bacon would have
rather had the whole trust fail than have Baconsfield integrated.” That finding
led the Supreme Court to hold that the trust’s termination had “eliminated all
discrimination against Negroes in the park by eliminating the park itself, and
[that] the termination of the park was a loss shared equally by the white and
Negro citizens of Macon since both races would have enjoyed a constitutional
right of equal access to the park’s facilities had it continued.” The property
thus ceased operation as a public park, reverted to Senator Bacon’s heirs, and
was sold to developers.
In the Baconsfield matter, had the government disclaimed the
gift at the outset, the donated land would have reverted to Senator Bacon’s
heirs and would not have been enjoyed by the public as a park. But that is what
happened to the property anyway. Thus, a disclaimer would have achieved the
same result while avoiding the harm caused by years of racial discrimination
against Black citizens wishing to visit the otherwise-public park. As in the
Girard College case, it also would have avoided forcing Black taxpayers to
subsidize the city’s ratification of the donor’s racial animus.
More recently, courts have invoked the cy-près doctrine to
modify discriminatory restrictions that had become unenforceable against a
municipal trustee under the state-action doctrine. As noted
briefly above, the cy-près doctrine permits judicial modification of
restrictions imposed by a charitable trust in a manner consistent with the
donor’s general charitable intent if the donor’s chosen charitable purpose is
(or has become) “unlawful, impracticable, impossible to achieve, or wasteful.”
Consider, for example, In re Certain Scholarship Funds,
which involved a public school’s administration of gifted scholarship funds.
According to one of the gifts’ original terms, the scholarship could only be
awarded to a “worthy protestant boy.” Rather than
accepting the state attorney general’s proposal to cure the state-action
problem by replacing the public-school trustee with private fiduciaries, the
state supreme court held that New Hampshire’s cy-près doctrine compelled a
modification that would retain the public trustee but excise gender and
religious discrimination from the gift terms. The court
noted that such modification was consistent with donative intent, crediting the
trial court’s finding that “the primary intent of [the] testators was not to
discriminate against women and non-Protestants, but to assist the
students . . . in their pursuit of higher education.” Donor intent matters in such cases
because the bedrock principle of testamentary freedom instructs courts to
implement the donor’s expressed preferences unless “the donor attempts to make
a disposition or achieve a purpose that is prohibited or restricted by an
overriding rule of law.”
Enlightened observers living in the twenty-first century
might take for granted the current state of constitutional and
antidiscrimination law. Surely any government today would be compelled by law
or political pressure to reject a restricted gift requiring it to discriminate
based on race, religion, or gender, would it? But the prevailing laws and norms
of today are the wrong yardstick for predicting the legal and social durability
of newly proposed gift restrictions, even ones that are likely to be viewed as
benign by a contemporary audience. After all, the discrimination that Girard
and Bacon enshrined in their gifts were both legal and socially acceptable back
in their day. Those gift restrictions did not become unenforceable until the
law and public policies concerning protected-class discrimination subsequently
evolved many years later.
Lessons learned from the state-action cases above, therefore,
remain relevant because restrictions that seem benign when judged by the
prevailing social norms of today could later violate the public policies of
tomorrow. Indeed, changes in the law can alter the public-policy landscape both
profoundly and abruptly. For one example of how quickly policy can shift, state
and local public universities recently began reviewing their ability to comply
with charitable gifts restricting scholarship recipients to underrepresented
racial and ethnic groups after the Supreme Court’s 2023 decision declaring
affirmative action in college admissions unconstitutional.
B. The Divergence Between Donor Restrictions and
Governmental Priorities
Charitable gift restrictions are enforceable in perpetuity, a feature
that allows the consequences of governmental acceptance to reverberate across generations.
For gifts large enough to stand the test of time, as they are often intended to
do, the longevity of charitable gift restrictions can interfere with the
ability of future government officials to allocate public resources optimally
according to current needs. When the government determines that a donor’s
restriction no longer aligns with current priorities, courts are generally
unwilling to modify the original gift terms without proof that the donor’s
restriction has become illegal and impossible. And when a court does authorize
modification on grounds of impossibility or impracticability, judicial approval
often comes after years of costly litigation that could have been avoided
entirely by disclaiming the restricted gift in the first place.
Consider, for example, Kapiolani Park Preservation Society
v. City and County of Honolulu, which involved a restricted gift of
parkland donated to the Hawaiian government in 1896. The donor’s
gift agreement expressly prohibited the lease or sale of any donated parkland;
later that same year, the territorial legislature codified the terms of the
donor’s gift agreement into law. In 1913, however, the
legislature repealed the 1896 statute, replacing it with new legislation that
conveyed ownership to Honolulu as a trustee. The 1913 statute did not retain
the 1896 statute’s prohibition against leasing parkland, but the leasing
restriction recited in the donor’s original gift agreement was never expressly
revoked or stricken by a court or legislature.
The leasing restriction’s enforceability went uncontested until
the 1980s, when the city sought to lease 10,000 square feet of parkland
adjacent to the Honolulu Zoo to a restaurant concessionaire for a fifteen-year
term. A neighboring
park preservation society opposed the development and filed a civil action
challenging the city’s authority to enter into the proposed lease. In defense of
the city’s development plans, the municipality argued that when the legislature
repealed the 1896 statute containing the original lease prohibition, the 1913
statute nullified both the prior statute and the donor’s restriction. The state
supreme court disagreed, finding that the U.S. Constitution’s Contract Clause
prevented the territorial legislature from “impair[ing] the obligations of the
contract under which the trust was created.” The state
supreme court thus held that the 1913 statute did not confer the city with
leasing authority that the original gift agreement expressly prohibited.
Ordinarily, decisions about whether to lease public lands or
to offer dining amenities on public property belong to the government. But in Kapiolani,
the government’s acceptance of a charitable gift of land allowed neighboring
residents to successfully upend the government’s plan to offer public dining
amenities to park-goers by enforcing restrictions imposed by a long-deceased
donor. As an application of testamentary freedom, courts decided the case
correctly: the donor had a right to impose a lease prohibition, and the
government accepted the gift subject to that restriction.
From the government’s perspective, however, the case offers
another cautionary tale about the long-term costs of accepting gift
restrictions that might seem benign by contemporary standards (such as a
prohibition on leases dated back to 1896). Here, the gift restriction did not
prohibit the city from operating its own dining amenity, so the restriction and
subsequent enforcement proceeding served only to prevent the government from outsourcing
the proposed dining operation in the manner it deemed most expedient: by leasing
a portion of the parkland to a private concessionaire. More recently, in 2022, Cleveland
Botanical Garden v. Worthington Drewien concerned a 1882 gift of land to
the City of Cleveland subject to the following express requirements: that the
grounds be maintained in a “condition as to make it an attractive and desirable
place of resort;” that the site be “known forever by the name Wade Park;” and
that the park “be open at all times to the public.” The gift
terms also provided that “if the grounds aforesaid or any part thereof shall be
perverted or diverted from the public purposes and uses herein expressed, the
said property and every part thereof to revert to me or my heirs forever.” After
accepting the gift, the city delegated the park’s maintenance and operation to
a professional operator now known as the Cleveland Botanical Garden (CBG). In 2003, the
heirs of the donor challenged CBG’s implementation of a new policy of charging
patrons for admission to its buildings, gardens, conservatory, and parking
facility as violations of the original gift terms.
After nearly two decades of litigation, the state supreme
court held that the heirs’ reversionary interests remained enforceable “because
those interests are original to the root of title,” but that the
city had not violated the donor’s restriction. The court found that
the interpretation advocated by the heirs would place the city in the untenable
position of having an obligation to maintain an attractive, freely accessible
park, while also complying with an obligation to seek permission from all heirs
before closing any portion of the park for maintenance, cleaning, or community
events. Unlike in Kapiolani,
the city ultimately prevailed. But Cleveland’s victory in the state supreme
court was costly and hard-fought, having generated at least twelve lower-court
decisions along the way.
Another recent case, In re Bierstadt Paintings Charitable
Trust, involved a prominent local doctor’s gift in charitable trust of
valuable artwork to the City of Plainfield, New Jersey, in 1919. The city
publicly displayed the artwork without issue until 2019, when municipal
officials determined that one of the paintings—Albert Bierstadt’s “The Landing
of Columbus,” which had appraised at $15 million—contained “racist
implications” that public officials believed would cause irreparable harm to
the city’s predominantly nonwhite community unless sold. Invoking the
doctrine of cy-près, the city filed a petition in state court for permission to
sell the Columbus painting, as well as another painting from the same donor
that the city did not contend to be objectionable. The city
proposed to allocate proceeds from the sale to local educational and
recreational programs.
The court denied the city’s petition for relief. Notably, the
court found “there was no indication that [the donor] intended for the trustee
to sell the works,” even though the terms of the original gift did not
expressly prohibit such a sale. To ascertain the donor’s
intent, the court admitted extrinsic evidence, from which the court concluded
the donor intended for the city to retain the artwork. The court
then denied cy-près modification because the alleged change in public sentiment
did not render the city’s continued ownership of the paintings impossible or
impracticable.
Even when governments succeed in modifying a gift
restriction, the litigation required to obtain court approval can be slow and
expensive. In United States ex rel. Smithsonian Institution, the
Smithsonian Museum—a federal institution established by Congress in 1846—sought
court approval to modify a 1920 gift restriction that mandated the continuous
public display of “ethnographic objects,” including “nineteen bronze
sculptures . . . of the Congolese people” that the donor
himself had fabricated. The museum claimed that
compliance with the gift’s public-display mandate was impractical for several
reasons, including incompatibility “with the Smithsonian’s mission because the
sculptures portray outdated colonial stereotypes.” The federal
district court for the District of Columbia ultimately granted the
Smithsonian’s petition for cy-près relief, finding that “the exhibit would not
reflect contemporary cultural and societal concerns and would therefore be
inconsistent with the Museum’s mission.” That
decision, however, was slow and costly, arriving seven years after the first
complaint from the donor’s heir and four years after the Smithsonian initially
petitioned for court approval to modify the restriction.
These cases demonstrate that courts are often reluctant to
grant a government’s request to repurpose restricted charitable gifts to
reflect current community needs and priorities: in Kapiolani Park, an
1896 restriction thwarted the government’s plan nearly a century later to offer
a dining concession at the public zoo; in Bierstadt Paintings, the court
construed a 1919 gift of artwork to prohibit the government from selling the
assets in 2019 even in the absence of a written gift agreement expressly
restricting the sale. Even when governments succeed in modifying a gift
restriction, the litigation required to obtain court approval is often very
slow and enormously expensive: in Cleveland Botanical Garden, courts
issued rulings on at least twelve occasions; in Smithsonian Institution,
the museum’s courtroom victory came after seven years of conflict with the
donor’s heir and four years of litigation.
C. Insufficient Funding to Implement the Donor’s
Charitable Purpose
Another fount of litigation involves the government’s
acceptance of a restricted charitable gift that lacks sufficient funding to
carry out the donor’s specified charitable purpose. That dilemma imposes
burdens on the government to either appropriate public funds to cure the
shortfall or to bend over backwards to identify alternative uses for the gift in
line with the donor’s charitable purpose. Because insufficiency of funding to
accomplish the donor’s charitable purpose is often foreseeable before the government
accepts a charitable gift, disclaiming rather than accepting insufficiently
funded charitable gifts can avoid the costs and burdens of post-acceptance
modification litigation.
In Town of Milton v. Attorney General, for instance, a
donor named Edwin Wadsworth devised his residuary estate to the Town of Milton,
Massachusetts, “for the purpose of establishing and maintaining a Public
Hospital,” a facility that the town lacked at the time of Wadsworth’s death, which
could have been between the years of 1899-1901. However, in
1903, an unrelated charitable corporation established a small public hospital
known as Milton Hospital. Because Milton Hospital
served the charitable purpose intended by Wadsworth, the town retained and
invested Wadsworth’s bequest for decades rather than spend it on a building
that would duplicate an existing public facility.
By 1939, however, Milton Hospital’s twenty-six-bed wooden
structure no longer adequately served the town’s population. The Wadsworth
bequest could be applied to fund the construction of a new public hospital, but
the gift’s outstanding balance fell short of the amount necessary to build a
new facility. Even if the
Wadsworth fund had been sufficient to construct a new facility, it would have
been economically infeasible for the town to operate and sustain two separate
public hospitals.
The town petitioned for court approval to transfer the
Wadsworth fund to the Milton Hospital’s charitable corporation to enable the
latter to construct a new hospital facility with the combined resources. The state
attorney general, however, opposed the petition, arguing “that by accepting the
gift, the town became bound to supply from its own funds all the money needed,
in addition to the Wadsworth Fund, to build, equip and maintain the hospital
according to the literal provisions of the will.”
The court agreed with the town “that there should not be a
duplication of hospital facilities in Milton, and that the fund should be
consolidated in some way with the funds of Milton
Hospital . . . to prevent such a duplication.” But the court
found that the record was insufficient to support the town’s assertion that
allocating the Wadsworth fund to Milton Hospital’s charitable corporation was
the closest possible alternative to the donor’s original intent, as required by
the cy-près doctrine. Thus, amid World War II,
the Massachusetts Supreme Court remanded the case for yet another round of
litigation rather than clear the way for the construction of a sorely needed
new medical facility.
Once again, another seemingly benign restricted gift
ultimately served to impede the government’s management of public resources
(here, the provision of hospital services). The donor cannot be faulted for
failing to anticipate the future construction of another hospital, let alone
that other hospital’s subsequent obsolescence. However, without judicial
modification, the precise language of the donor’s restriction could be
construed to require an inefficient duplication of hospital facilities rather
than to permit allocating the resources to an existing entity prepared to help
fund construction. That litigation seems to have needlessly consumed municipal
resources that could have been devoted more directly to public healthcare
services.
Another case decided in the same decade, Fairbanks v. City
of Appleton, presented facts similar to Milton. Fairbanks entailed
a bequest for the sole purpose of constructing a public facility (this time, a
home for the elderly), where the gift amount was insufficient to fund the full
cost of construction, and where an existing facility served the same charitable
purpose. Several
years after the donor’s death, the bequest remained unspent, so the donor’s
heirs sued the city to terminate the charitable trust and revert the
outstanding balance. But, unlike in Milton,
the state supreme court in Fairbanks invoked cy-près to grant relief on
grounds of impossibility (i.e., the gift amount was inadequate to accomplish
the donor’s charitable purpose). The court
modified the trust’s purpose to include maintenance of the existing old-age
home, while still limiting the application of trust assets to funding only
those portions of the existing facility that complied with the donor’s mandate
(i.e., that elderly residents “enjoy the comforts of life at reasonable rates
and for reasonable compensation”).
Cases like Milton and Fairbanks reveal that governments
are sometimes willing to accept restricted charitable gifts that contemplate major
public-works projects without adequate funding from the donor. Courts may
ultimately approve modifications that redirect such gifts to a similar
charitable purpose, but forcing the government to incur litigation costs to
alter the donor’s restrictions can undermine and delay the delivery of charitable
benefits to the public. In Milton and Fairbanks, both donors
almost certainly would have agreed to the ultimately-approved modifications
because the alternative applications remained faithful to their respective
charitable purposes.
When a donor is still alive, the government can discuss the
acceptability of a restricted gift’s proposed terms. The donor can then decide
whether to relax or remove the restriction in light of the government’s
objection. But those discussions between the donor and government often fail to
occur in the context of charitable bequests because the government is not
usually involved in the donor’s estate-planning process and does not learn of
the restriction until after the donor’s death. At that point, the restriction
is irrevocable, so the government may accept the gift, in which case it must
comply with any restrictions or obtain judicial approval to modify them. Or the
government may disclaim, in which case the gift passes to the next eligible
taker in the donor’s estate plan.
The government cannot negotiate with a deceased donor, so its
best option may be to disclaim even the most anodyne of restricted gifts, such
as an earmark for hospital construction, because the alternative—modification
litigation—can be slow, costly, and unpredictable.
D. Governmental Liability for Gift
Maladministration
The government’s administration of a restricted charitable
gift can implicate liability-creating legal obligations, such as general tort
and fiduciary duties of care, impartiality, and loyalty. This Section
explores the application of those duties to the government as the donee of a
restricted charitable gift and the government’s sovereign immunity for
liability in such claims.
When administering a restricted charitable gift, a government
donee differs from private fiduciaries in two respects. First, the government’s
assumption of fiduciary duties may require statutory approval. Second,
sovereign immunity may absolve governmental trustees of liability for breach of
fiduciary duty unless waived. However, neither
protection against governmental liability is ironclad.
Remember, for instance, Woodward School for Girls, Inc. v.
City of Quincy. In Quincy, a charitable beneficiary sued the
municipal trustee for imprudently investing most of the trust corpus in
fixed-income assets. For decades, that investment strategy failed to generate
any capital appreciation. The state supreme court
found that Quincy’s failure to “take any steps to protect the Adams Fund’s
principal against inflation . . . alone was sufficient to
constitute a breach of its fiduciary duty.” The state
supreme court also ruled that Quincy had “impliedly waived” the defense of
sovereign immunity, reasoning that when the city “agreed to serve as trustee,
it assumed the fiduciary duties of that role, including the consequences for
not fulfilling these duties.” The court emphasized that
the municipality had taken “on a responsibility beyond its inherent or core
government functions and therefore serve[d] in a capacity that could just as
easily be accomplished by a nongovernmental entity.”
In the disturbing case of C.J.S. v. Board of Directors of
City Trusts, an elementary-school boarding student at Girard College (the
same school created by the 1831 will of Stephen Girard) sued the
Board of Directors of City Trusts (the Board) for its failure to train
“Residential Assistants” properly on protocols for protecting children against
sexual misconduct. The lawsuit named the
Board as defendant because a state statute had established the Board as the
legal entity responsible for “administer[ing] estates bequeathed
to . . . Girard College.” The
plaintiff claimed that, as a result of the Board’s failure, he was repeatedly
raped and sexually assaulted inside the school’s dormitory by older students. The city
asserted the defense of sovereign immunity, but the court, upon considering the
precise language of the state’s immunity abrogation statutes, found that the
Board was not covered by sovereign immunity, either as a state agency or a
local authority.
Courts, however, have ruled inconsistently on the
applicability and scope of sovereign immunity to restricted charitable gifts.
For instance, in a prior case with nearly indistinguishable facts from C.J.S.
(i.e., sexual-misconduct claims asserted by a Girard College residential
student against the same Board), a Pennsylvania trial court dismissed the
plaintiff’s complaint on sovereign-immunity grounds. On appeal,
the plaintiff conceded the Board’s entitlement to sovereign immunity, arguing
instead that Girard College and its managers could be sued directly for their
misconduct. The
appellate court disagreed, concluding that “Girard College does not act
independently of the Board charged by statute with control over all aspects of
College’s operations.” The court affirmed
dismissal because the plaintiff had conceded the Board’s entitlement to
sovereign immunity for claims against the school.
As these cases reveal, the risk exposure accompanying the
government’s acceptance of restricted charitable gifts can include tort and
fiduciary liability without the protection of sovereign immunity. That
liability risk, in turn, suggests that the government should exercise extreme
caution when evaluating whether to accept (or retain) a restricted charitable
gift that expressly or implicitly imposes fiduciary or managerial obligations
of gift administration.
II. policy
implications
Our survey of litigated disputes involving restricted
charitable gifts to the government suggests that, in too many cases, the
government’s acceptance imposes costs that can significantly undermine the
public benefits produced by this form of philanthropy. We therefore believe
that, while donor-imposed restrictions governing charitable gifts should remain
imposable and enforceable, the government should be far more circumspect about
accepting a restricted charitable gift in the first place. We submit that, on
balance, it is better for both the donor and the government to allow private
fiduciaries to administer restricted charitable gifts.
Our proposal for a more robust invocation of disclaimer rights
is a forward-looking measure designed to help governments evaluate
donor-imposed restrictions prior to accepting a charitable gift.
Disclaimer rights are unlikely to provide relief for governments that have
already accepted a restricted charitable gift because disclaimers are generally
barred after accepting the property interest. After
acceptance, the government must generally obtain court approval to modify a
restriction. Alternatively, a government seeking to return a restricted gift
could try enacting a statute mandating disposal of the gifted property, but if
challenged, courts would have to decide whether the disposal statute prevails
over the disclaimer bar.
For the government, a policy of subjecting restricted-gift
proposals to more exacting scrutiny prior to acceptance would create a better
process for flagging restrictions that are likely to generate long-term
compliance problems and costly modification litigation. While the precise
manner in which compliance might become problematic may be unforeseeable, the
likelihood of a permanent restriction prompting a need for future modification
seems inherently foreseeable. A review process that invites public
participation, perhaps akin to the notice-and-comment procedures in
administrative law, could help ensure that any restrictions agreed to by the
government could be vetted transparently and allow the affected local community
to air any objections. Such a policy might also persuade donors to contribute
charitable gifts to the government property without imposing inflexible
restrictions.
For donors who care about the enforcement of their
restrictions, a governmental policy of rejecting burdensome restrictions might
encourage the appointment of private corporate fiduciaries to administer
restricted charitable gifts. Donors can exact stricter compliance with their
gift restrictions by appointing corporate fiduciaries that enjoy perpetual
existence, and by
utilizing other administrative mechanisms such as the appointment of trust
directors empowered to supervise, remove, and sue corporate charitable trustees
if they fail to comply with the donor’s mandate. Unlike
elected government officials, who must respond to evolving public sentiment and
changes in public policy compelled by the state-action doctrine, private
fiduciaries need not balance their legal obligations to remain faithful and
obedient to the donor’s charitable purpose against the public interest,
constitutional constraints, or political considerations. The appointment of a
private fiduciary might also reduce the government’s temptation to circumvent
procedures for modifying gift restrictions by invoking the nuclear
option—exercising the state’s power of eminent domain to condemn gifted real
property.
Applying these lessons, this Part provides two proposals for
reform. First, we recommend formal procedures through which the government
could prospectively review and, if appropriate, reject proposed gift
restrictions prior to acceptance. Second, we recommend substantive criteria to
guide the government’s consideration of restricted gift proposals and to place
prospective donors on notice of factors the government will consider in
deciding whether to accept a gift.
A. Formal Procedures for Governmental Review and
Public Participation
A threshold question implicated by the government’s power to
accept or reject a restricted charitable gift is what procedures it will follow
when reviewing a gift proposal, soliciting public participation, and
formalizing a decision to accept or reject a gift. Instituting formal
procedures for conducting a more careful review of restricted charitable gifts
can help governments make better decisions that avoid future litigation and
compliance costs. For a sample of regulatory options, we considered the handful
of state statutes that have already implemented formal gift-approval
procedures.
In Maine, proposed gifts to the government must be submitted
for review to the applicable municipal legislative body, which must provide the
donor with written notification of acceptance or rejection. In
Minnesota, gift acceptance requires a vote of approval by a two-thirds majority
of the municipality’s governing body. Other
statutes are more deferential to local governments. South Carolina, for
example, delegates to the “proper authorities of such municipality”
determination of whether a donor’s “conditions [are] reasonable, and [in] the
best interests of such municipality.” South Dakota
authorizes municipalities to accept restricted charitable gifts if “agreed to
by the governing body and board.” Meanwhile,
in New York, the secretary of state is empowered “to accept and administer as
agent of the state any gift, grant, devise or bequest, whether conditional or
unconditional,” but only “[w]ith the approval of the governor.”
The choice of which particular legislative body, agency, or
public official should be designated to conduct a review of charitable gift
proposals might vary according to local custom, the size of the governmental
unit, and the availability of existing personnel assigned to related tasks. For
example, while Minnesota requires gift approval by vote of the municipality’s
governing body, South Carolina allows the governmental unit to delegate
approval to “proper authorities.” Another
possibility might be to delegate the decision to a standing committee of the
legislative body. Most importantly, whichever agency or official is ultimately
tasked with reviewing restricted charitable gift proposals should be equipped
with clear criteria for considering the merits and empowered to reject gifts
that fail to satisfy general standards of acceptability.
The design of formal procedures for governmental review could
be informed by models already prevalent in the private sector, where
philanthropy experts advise nonprofit organizations to routinize procedures for
reviewing gift proposals. The National Council of Nonprofits, for instance,
recommends formalizing, enforcing, and publicizing a standing institutional
policy governing the acceptance of charitable gifts to avoid liabilities and
responsibilities that the nonprofit organization is not prepared to undertake. To manage
donor expectations, some charitable gift acceptance policies expressly warn
donors that the charity will conduct a formal review or consult with legal
counsel before accepting certain types of gifts.
At a minimum, we believe that a governmental process for the
review and approval of charitable gifts should contain the following three key
features: (1) clear procedures for submission and review of a restricted gift
proposal; (2) an opportunity for public participation and input (perhaps akin
to the administrative law concept of notice and comment); and (3) a requirement
that any decision to accept a restricted gift be approved by the governing
legislative body or the government office to which the legislature has
delegated the decision. Such procedures would prevent the government from
passively accepting a restricted charitable gift by inaction while facilitating
a more careful and transparent consideration of the merits with the benefit of
public input.
B. Substantive Criteria for Gift Acceptance
A thoughtful gift acceptance policy should include
substantive criteria to guide the government’s decision of whether to accept or
reject a restricted donation. Specifying and publicizing gift acceptance
criteria would also place donors on notice, thus allowing them to adjust their
estate plans to satisfy the government’s acceptability standards or to select
an alternative donee, such as a private charity or fiduciary, to receive and
administer the gift.
In developing substantive criteria, governments might consider
the most frequently disputed restrictions identified by our litigation survey.
A litigation-averse approach, for example, might presumptively reject any
restricted charitable gift unless: (1) the gift terms expressly authorize
modification without court approval whenever any current or future law renders
a restriction unenforceable under the state-action doctrine; (2) the gift terms
expressly waive the right of any donor or the donor’s successors to enforce
restrictions in court; (3) the donor (or donor’s estate) demonstrates that the
gift is adequately funded to accomplish the donor’s stated charitable purpose;
and (4) the gift terms expressly immunize the municipality for liability for
breach of fiduciary duty. Such a presumption would reduce the government’s cost
of complying with and modifying donor-imposed restrictions should they later
become impracticable.
Substantive gift-acceptance criteria might also build on the
accumulated wisdom of charitable nonprofit organizations in the private sector.
For example, the Nonprofit Risk Management Center has identified several
factors that private charities should consider as part of a comprehensive
gift-acceptance policy, including (1) alignment with the donee’s core values,
(2) compatibility between the donor’s purpose and the donee’s use, (3) impact
of gift acceptance on the donee’s reputation, (4) degree to which the gift
benefits the donor rather than the donee, (5) consistency of gift acceptance in
light of prior practice, (6) anticipated expense or difficulty associated with
gift implementation, and (7) impact on donor incentives for future gifts. Such
criteria could serve as a blueprint for developing gift-acceptance policies in
the public sector because governments confront similar considerations as private
nonprofits when reviewing the acceptability of charitable gifts. In many cases,
the above criteria can be considered inexpensively without imposing
unreasonable burdens on smaller governments that lack adequate staffing or
resources to conduct elaborate feasibility studies.
Our proposal recommends a governmental acceptance policy
containing features that donors will probably regard as unfriendly, such as a
presumption that gifts should be rejected unless restrictions can be modified
without judicial approval or unless the gift expressly exonerates the
government for fiduciary liability. We view this disincentive as a feature
rather than a bug because we believe the public interest in charitable assets
can be better served by discouraging the government’s acceptance of restricted
charitable gifts.
A rational donor who views the enforceability of restrictions
as an essential inducement would opt to structure their gift differently, such
as by naming a private corporate fiduciary to supervise and administer the gift
(perhaps coupled with the appointment of a trust protector to supervise the
corporate trustee). Channeling restricted
charitable gifts to private corporate fiduciaries rather than to governmental
donees would force donors to internalize the cost of administering and
enforcing their own restrictions. It would also enable corporate fiduciaries
with greater sophistication and experience than the government in such matters
to vet the proposed gift more carefully before accepting legal responsibility
for carrying out the donor’s restrictions.
While it is true that private fiduciaries might be even less
accountable to the public for their administration of charitable gifts than
government donees, donors seeking to avoid public scrutiny have already discovered
ways to opt out of the traditional mechanisms of charitable oversight. Indeed,
a modern trend of philanthropy has shifted toward the privatization of
charitable activities, as wealthy donors resort to taxable forms of
philanthropy to avoid the regulations and restrictions applicable to
tax-deductible gifts and tax-exempt nonprofit organizations.
We also acknowledge that a policy of discouraging restricted
charitable gifts to the government could incentivize donors to utilize private fiduciaries
to accomplish controversial charitable purposes that a government would be
expected to reject on public policy grounds. But donative transfers that are
contrary to public policy are already unenforceable even when implemented by
private fiduciaries, and donors already have the option of attempting to
accomplish such goals soto voce by appointing a private fiduciary. We
see little upside to entangling the government in such transactions.
Another potential side effect of subjecting restricted charitable
gifts to more exacting scrutiny is that donors might reconsider their
philanthropy entirely and abandon plans to make a charitable gift at all. The
litigation history of restricted charitable gifts to the government suggests
that the long-term costs of such restrictions might outweigh the philanthropic
benefits enjoyed by the public, though we acknowledge that other commentators
might evaluate the relative costs and benefits of restricted charitable gifts
differently.
Conclusion
Testamentary freedom broadly empowers donors to impose
restrictions governing the future use of gifted property. But donors who
exercise that power should bear all direct and indirect costs implicated by
their gift restrictions. Restricted charitable gifts to the government often
have the effect of shifting the costs of administration, compliance, and
modification from the donor to the government. The government, in turn, is
usually uncompensated for serving as the donor’s charitable fiduciary and
assumes the risk of governmental liability for gift maladministration or
fiduciary breach.
The administration of restricted charitable gifts can also be
incompatible with the traditional functions of government that serve the
public. The acceptance of restricted charitable gifts can obligate the
government to devote public resources to complying with the donor’s privately
selected terms or to funding litigation to obtain court approval to modify the
gift restriction. Compliance with a gift restriction can also problematically
align the government with the donor’s idiosyncratic viewpoints which may be out
of step with public sentiment. Why, for example, should the Black taxpayers of
Macon, Georgia, have been forced to subsidize litigation seeking to enforce the
donor’s discriminatory intent to deprive Black citizens of accessing public
parkland?
Restricted gifts can also force the government to provide
services for which it lacks institutional competence. What institutional expertise,
for example, made the small city of Plainfield, New Jersey, a suitable curator
of valuable works of fine art such as the Bierstadt paintings? Small cities
like Plainfield are not usually in the business of collecting fine art.
Likewise, why should anyone expect the City of Philadelphia to be capable of
competently and safely operating a residential boarding school for elementary
school children such as Girard College? Large cities like Philadelphia operate
schools, public housing, and homeless shelters, but they are not usually in the
business of operating dormitories for young children.
Unlike philanthropic donees in the private sector, where
industry best practices encourage charities to adopt transparent
gift-acceptance policies, most governments do not appear to have formalized
procedures or criteria for evaluating the acceptability of restricted
charitable gifts. That is problematic because the practice of accepting
restricted charitable gifts by default deprives the government of an
opportunity to consider the potential long-term implications of a donor’s gift
restrictions prior to acceptance. Our litigation survey of disputes involving
charitable gift restrictions and governmental donees reveals a host of costly
consequences that could have been averted by a more circumspect gift-acceptance
policy. The frequency and severity of those disputes show that restrictions
that can seem benign at the outset can become illegal, impracticable, or risky
to administer as the decades pass, social norms evolve, and circumstances
change.
We believe that donor-imposed restrictions governing a
charitable gift should remain imposable and enforceable, but the government
should be far more circumspect about accepting a restricted charitable gift in
the first place. Governments should consider establishing formal, transparent procedures
for evaluating the acceptability of restricted charitable gifts. The officer or
body deputized with authority to conduct such evaluations should be empowered
to disclaim restricted gifts that fail to satisfy the government’s criteria for
gift acceptance.
* * *
Reid Kress Weisbord is the Distinguished
Professor of Law and Judge Norma L. Shapiro Scholar, Rutgers Law School; Visiting
Professor of Law, Columbia Law School (Fall 2025); Visiting Professor of Law,
University of Miami School of Law (Spring 2026). Christiana Markella de Borja
is a 2025 graduate of Columbia Law School. The authors thank Naomi Cahn, David
Horton, Jeffrey Pennell, CJ Ryan, and Stephen Urice for helpful feedback. The
authors are also grateful for superb editing by Gila Glattstein and editors of
the Yale Law Journal.